Did you find a property that suits your needs?
The negotiation process is intimidating for many home buyers. Educate yourself so you have a better chance of closing a good deal. Learn the ins and outs of real estate offers to avoid getting stuck in a bad home buying situation.
How to Offer on a House
What are the most important steps when making an offer?
Gathering Proof of Funds
The first thing to prepare is your proof of funds. Your pre-approval or bank account balance proof will suffice. Pre-approvals are typically valid for 60 to 90 days, so request yours when you are ready to make offers. For cash deals, simply request a “proof of funds letter” from your bank.
Writing Up the Contract
Next is to work with a loan officer to do up the contract. A lawyer must notarize the paperwork, which turns it into a legally binding offer.
Deciding on the Deposit
A non-refundable “earnest money deposit” is standard practice. The bigger the deposit, the more appealing your offer is to the seller. You can also put a percentage of the purchase price into escrow early to show your urgency.
Setting Your Closing Time
Now you must decide on your closing period. How long do you need before the funds can go to the seller? The answer depends on your funding situation and any conditions that you must meet.
Picking Any Conditions
Do you need to inspect the place more? Was there a red flag that needs further investigation? Do you worry that your financing might not go through? What about any specific requirement for closing time, what’s left in the house, etc?
Weigh out potential conditions and decide what to include. Do not get super picky because you can scare away a seller. Focus on home buying conditions that safeguard you against potential red flags.
What Should I Offer for a Home?
You must put an attractive number down to grab the seller’s attention. Yet, no one wants to overpay when buying a home. This is possibly the biggest purchase you will ever make in your life. Take the time to determine the fair market value and go from there.
What is the House Worth?
Use market research tools like the MLS, Realtor.com, Zillow, etc. These services provide all the data and filtering options you need. Look for comparable properties and check sale histories for the area. Ask the selling agent or private seller the basis of their asking price. Look for financial factors that justify paying less and factor them into your offer.
What is the Market Like?
In a seller’s market, it can be an insult to talk the price down. Negotiating home prices is only easy if the property sits for months. You must consider the listing price to be fair. Look at the investment from a different perspective. How much equity could you lose or gain from the property? At what price-point is it a “great deal” based on your numbers? If the market shifts aggressively, what value will the property have in the future?
What is Your Budget Like?
Look at the cost of owning the home. Can you afford the payments? What stability do you have if an emergency repair occurs? Consider the property itself and the likelihood of such an unexpected financial struggle. If the property requires work already, it’s advisable to shoot for well below the maximum you can borrow.
What If My Offer Is Accepted?
First off… Congratulations!
Your deal is on the table and ready for execution. Both parties must complete any steps relating to conditions in the contract. The buyer and seller are equally responsible for ensuring they follow through with any requirements. Failure to follow through on conditions will void the deal.
You hold the right to perform a walk-through and inspection on the property.
Your next step is to work with a mortgage title company. It’s your responsibility to start this process. Some sellers will recommend a specific company. Make sure whoever you choose is reputable. The offer contract will include terms on who covers the cost of title insurance.
Your lawyer will search and register the deed/title. He or she will complete the mortgage paperwork. Now, the escrow is ready for release and the deal is complete.
This article covers the most basic factors in offering real estate and closing a deal. The specific steps and options for home buyers vary by situation. Working with a buying agent will put the mind at ease.
Think smart, offer wisely. It is possible to get a good deal AND protect yourself.